An appeals court on Tuesday rejected the government’s argument that a program promising special status and work permits to some illegal immigrants should be allowed to move forward while the underlying legal case is litigated.

Washington — The Obama administration has lost a bid to lift a temporary injunction blocking the president’s controversial executive action that promised special status and work permits to nearly 5 million immigrants living illegally in the United States.

Voting 2 to 1, a panel of the New Orleans-based Fifth Circuit Court of Appeals on Tuesday rejected the government’s argument that the program should be allowed to move forward as the underlying legal case is litigated.

Instead, the appeals court upheld a decision from February by a federal judge in Texas that the public interest was best served by blocking the new program until broader legal issues could be examined and ruled upon.

At issue ultimately in the case is whether President Obama exceeded his authority last November when he directed Homeland Security officials to grant special immigration status to nearly half of the 11.3 million immigrants who entered the US illegally or overstayed their visa.

The president said he was acting alone to address immigration because Congress had failed to vote on a comprehensive immigration reform legislative package that he favored.

His action prompted a lawsuit led by Texas and 25 other states. Lawyers for the states argue that the Obama administration is failing to faithfully execute immigration statutes as passed by Congress.

Government lawyers counter that federal law grants broad discretion to immigration officials – including discretion to defer deportation and to grant work permits.

The only question decided by the appeals court on Tuesday was whether to allow the government to move forward with plans to grant deferred deportation status and work permits while the underlying case continues in the courts.

In allowing the injunction to stand, the appeals court said Texas had demonstrated the necessary legal standing to sue because the new immigration program would force Texas to issue up to 500,000 driver's licenses to undocumented immigrants.

The appeals court also expressed skepticism about the government’s broader case. “The United States has not made a strong showing that it is likely to succeed on the merits,” Judge Jerry Smith wrote in the majority opinion.

Judge Smith was joined in the majority by Judge Jennifer Walker Elrod.

In a dissenting opinion, Judge Stephen Higginson said the dispute should be resolved by the political branches of government, not the courts.

“The political nature of this dispute is clear from the names on the briefs: hundreds of mayors, police chiefs, sheriffs, attorneys general, governors, and state legislators – not to mention 185 members of Congress, 15 states and the District of Columbia on the one hand, and 113 members of Congress and 26 states on the other,” he said.

The two majority judges disagreed. They said the president’s executive action crossed a line.

“[Mr. Obama’s] version of deferred action ... is more than nonenforcement: It is the affirmative act of conferring ‘lawful presence’ on a class of unlawfully present aliens,” Smith wrote.

“Though revocable, that new designation triggers eligibility for federal and state benefits that would not otherwise be available,” he said.

The judge said that prosecutorial discretion is broad, but not unfettered. “Declining to prosecute does not convert an act deemed unlawful by Congress into a lawful one and confer eligibility for benefits based on that new classification,” Smith wrote.

The majority judges said there was no provision in federal immigration law explicitly delegating authority to the executive branch to provide such benefits to millions of otherwise deportable individuals.

The appeals court action means that the president’s immigration program will remain on hold, at least until a second panel of the Fifth Circuit rules on broader issues in the case. Oral argument is set for early July.

Immigrant rights activists expressed disappointment with the appeals court’s decision. But they were also hopeful that Obama’s immigration program would ultimately be upheld by the courts.

“We think it is only a matter of time before the executive authority to issue these kinds of programs is affirmed and the programs are allowed to go forward,” Melissa Crow, legal director of the American Immigration Council, said during a teleconference with reporters after the decision was announced.

Marielena Hincapié, executive director of the National Immigration Law Center, said the decision was disappointing but not a surprise. “The Fifth Circuit is a very conservative court,” she said.

Ms. Hincapié called the states’ lawsuit “a clear attack on our communities.” She said the long-term impact of delays in the president’s program would be “devastating” and would cause confusion and fear within immigrant communities.

Texas Attorney General Ken Paxton praised the Fifth Circuit’s ruling.

“This decision is a victory for those committed to preserving the rule of law in America,” he said in a statement.

“Telling illegal aliens that they are now lawfully present in this country, and awarding them valuable government benefits, is a drastic change in immigration policy,” he said.

“The president’s attempt to do this by himself, without a law passed by Congress and without any input from the states, is a remarkable violation of the U.S Constitution and laws,” Mr. Paxton said. “We will continue to fight the brazen lawlessness that has become a trademark of the Obama Administration.”